Posted on December 11, 2016
The past one month has
seen people discuss the impact of demonetisation threadbare. Right from the
positives, to the negatives to the fake rumours, all have been debated in media
and social media. The latest thing catching the eye of the public are the
frequent reports of major raids in some or the other part of the country
where-in huge stashes of gold, old demonetised cash, or new currency have been
seized by the tax authorities.
The country-wide total of
seizures till date is staggering:
Demonetised old currency Notes (Rs.in Lakhs) 6709
New 2000 Rs Notes (Rs.in Lakhs) 4603
Gold (Kilograms) 262
Update: As a benchmark, one can see the figures of assets seized
in raids in earlier periods. For example, as per this report,
the first seven months of 2015 saw Income Tax raids seize assets worth about Rs
102.50 crores. The same figure for the same seven months of 2016 was about Rs
330 crores. We are just 4 weeks into demonetisation, and the raids have started
just 2-3 weeks back. In this short span, the value of assets seized has easily
surpassed the 7-months figure of 2015 and is all set to overtake even the
7-months figure of 2016.
What explains this
sudden spurt in successful raids? How are the authorities getting information
about such huge hoards of cash? Is it due to the rumoured “GPS chip” in the new
Rs 2000 notes?
The most likely
reasons are these:
Firstly, the tax
authorities are liasoning with various other intelligence authorities like CBI
etc. Such swoops based on the information available only to the tax
department are not so common. This kind of targeted attacking works best when
information is shared among various agencies.
Secondly, there has to
be a clear-cut instruction from above. And it has to come from the very
top, i.e. the Prime Minister, flowing to the Finance Minister, and then all the
agencies. The instruction is most probably to aggressively chase such money
launderers. It is even possible that the IT sleuths have been given targets,
failing which they are answerable to their higher-ups.
Thirdly, there is one
key feature regarding demonetisation which ensures that information flows
rather easily: Whether you are getting rid of old notes or getting new notes,
you eventually have to go to a bank. Sure, you might unload your old wealth
with some other launderer but the final point in this chain has to approach a
bank. So also, the source of any new currency has to be a bank.
And that is where
everyone leads a trail.
The entire chain of
launderers is only as strong as its weakest link. The tax authorities have to
crack only one of the agents in the chain, and a quick look into his
communication records like phone, sms or email would reveal all the people he
has been dealing with.
There are multiple
ways to get to such people. All data of bank transactions is on record and
is reported to tax authorities. Any spike or high value transaction in a
normally defunct account can be traced easily using data analytics tools. From
there on it is just a matter of tracing the branch, the account holder, and
using the branches surveillance systems to catch any more accomplices.
Even if the entire
exercise has been done via the connivance of the bank branch manager, he will
still leave some or the other trail in the bank’s system to account for the
sudden disappearance of a huge stash of cash received from the RBI. The RBI
maintains a record of cash supplied to each and every branch and will obviously
check the outflow of such cash too, to see that it reconciles with the inflow.
And that can be enough to probe deeper and reveal more leads. As has been seen
in many raids, even when the bank manager was hand in glove, the IT sleuths
have caught up with him and the launderers.
And this is just the
beginning.
We are right now in a
dynamic situation since the window till 30th December to deposit old notes is
still open. Banks are still accepting old notes and data is being generated
even as we speak. Come January or February, all this data will be frozen and will
be a gold-mine for analysts.
Any dormant account
suddenly being triggered (egs: shell or dormant companies being used to launder
cash) or any account which usually has lower volumes, or any newly opened
accounts showing sudden increase, or any accounts showing a deposit and an
instant transfer or withdrawal, all these anomalies will be crystal clear from
the data of the banks. It would be only a matter of time before sleuths begin
identifying and investigating the parties concerned.
This is as far as hard
cash is concerned. How do they tackle any other forms of conversions? One of
the popular modes could be the real estate sector. Deals could have been struck
to sell properties at lower than fair values, with the difference being paid in
old cash, basically the purchaser off-loading his cash onto the seller. The
seller obviously has to get the cash to a bank, but there is another way they
can get caught.
For the past few
years, sub-registrar offices have been insisting on PANs of the parties
involved in real-estate transactions. This data is then passed on to the Income
Tax authorities. Till now such data was only used by the Income Tax Department
in scrutiny assessments or in case of major mis-matches in tax returns and
their data. But going forward, one wouldn’t be surprised if they start using
this data more actively.
One possible move in
the future could be opening up all the cases where properties were transferred
from 9th November 2016 till 30th December 2016. Auto-generated notices can be
sent to the concerned persons and where satisfactory replies are not received,
or where some other parameters are inconsistent, further details can be asked
for.
The fact is in today’s
digital world, much more data is available and one needs only the will and
skill to parse through all the data to catch the crooks. Hence it is only a
matter of time rather than anything else, even though the party seems to have
begun. And if you think this is the end, wait till GST comes. Once GST is
implemented, the data at hand of the tax authorities will make tax evasion much
harder.
